Household Energy Clean Transition Mechanisms under Market Failures: A Government Financing Perspective

Abstract: Clarifying the principles governing the transition to cleaner household energy is crucial for enhancing households’ access to clean and efficient energy, thereby enhancing households’ welfare and overall societal well-being. However, most existing energy transition theories are grounded in assumptions of perfect market functionality. This paradigm deviates from the reality of market failure and needs to comprehensively elucidate the process of transitioning to cleaner household energy. This study develops a framework for understanding the transition to cleaner household energy within the context of market failure. It investigates the effects and mechanisms of government funding and energy endowment on this transition, considering the accessibility and affordability of clean energy. The analysis is based on 20 years of data on rural energy consumption across 29 provinces in China. The findings reveal that government funding inputs significantly enhance the transition to cleaner household energy, facilitated by the clean energy supply effect, clean technology promotion effect, clean knowledge dissemination effect, and financial constraint alleviation effect. Heterogeneity analysis indicates that in regions abundant in renewable energy, government funding inputs can effectively stimulate the development and utilization of renewable energy sources, thereby enhancing the accessibility of clean energy and driving the transition to cleaner household energy. Finally, it is recommended that the market play a constructive role in the energy transition process in addition to increased government investment in energy infrastructure, extension services, and public education.